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World Bank competitiveness rankings weren’t manipulated, audit shows

By Josh ZumbrunThe Wall Street Journal

Wed., July 11, 2018

World Bank rankings assessing countries’ competitiveness weren’t manipulated for political purposes, an external audit found, though it faulted the organization for changing its methodology so frequently the rankings became confusing.

The audit, released Wednesday, came after Paul Romer, then the World Bank’s chief economist, raised concerns about the rankings earlier this year.

In January, then-World Bank chief economist Paul Romer expressed concerns that the bank had changed its statistical methods in ways that punished nations, particularly Chile. He resigned later that month. (shawn thew / European Pressphoto)

The report, “Doing Business,” is one of the organization’s most popular and widely disseminated publications for ranking countries on the competitiveness of their business environments.

“Concerns that World Bank staff implement methodology changes to manipulate the Ease of Doing Business indicators of specific economies or to sway domestic politics in affected economies are entirely without evidence,” said the audit. “However, frequent methodology changes reduce the value of the indicators to researchers, policy makers and the media.”

In January, Mr. Romer, who had been chief economist of the multilateral development bank for just a little over a year, expressed concerns in an interview with The Wall Street Journal that the bank had changed its statistical methods in ways that punished nations, particularly Chile. Mr. Romer said he couldn’t be confident in the integrity of the process that had led to the methodology changes. He resigned from the bank later that month.

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Mr. Romer published figures on his personal blog showing that Chile’s ranking in the report had plunged, but that it was almost entirely because the World Bank repeatedly altered the report’s methodology. Without such changes, Chile would have dropped two places in the rankings, Mr. Romer calculated. But because of the changes, it had fallen 23 places.

Mr. Romer couldn’t immediately be reached for comment Wednesday.

The World Bank’s management disputed in January that its rankings had been manipulated for political purposes, but the bank’s board of executive directors expressed “regret and concern about the impact on Chile.”

The bank said Wednesday that it “welcomes the thoughtful and thorough findings of the Doing Business external review, and we are gratified to see that the review found the previous allegations concerning the integrity of the report and the broader Doing Business team to be unfounded and without merit.”

In recent years, the World Bank has tweaked the method of calculating its ranking every year, meaning that countries could see their ranking plunge even though their underlying business environment hadn’t changed.

The audit faulted the bank for the practice, noting that the bank’s economists had disregarded the advice of an independent review panel in 2013 that had explicitly cautioned against frequent changes to the report’s methodology.

“Changes in economies’ Ease of Doing Business scores are followed intensely by international and domestic media, often without attention to notes on methodology changes, and can plausibly affect national policies and even elections,” the audit concluded. “Frequent methodological changes create scope for discounting the integrity and objectivity” of the World Bank’s data, the audit said.

The audit recommended that the World Bank refrain from constantly tweaking the way the report is compiled, and the World Bank said it “agrees with the recommendation to put forward methodology changes to existing sets of indicators only every 5 years.”

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